Natural gas (NG) prices are set to rise to $3.8 amid cold weather and shortages

The winter period is traditionally characterized by rising natural gas (NG) prices, and this year was no exception. Already in November and early December, there was a sharp increase in prices, which reached annual highs. This surge was due to a combination of several factors, among which the reduction of gas reserves and high exports to energy-deficient European countries stand out. The imbalance between supply and demand on the global gas market created favorable conditions for a price rally.

Natural gas prices are expected to further increase ahead of the New Year holidays, from December 23 through December 31, 2024. This forecast is supported by expectations of colder weather in January, which will increase heating demand. In addition, during the last week of December, the temperature in most parts of the United States is forecast to drop significantly, which will consequently increase gas consumption for heating homes and buildings. The expected below-average temperature is likely to create additional demand, which in turn will lead to higher prices.

Concerns about gas shortages are fueled by data from the Energy Information Administration (EIA), which reported a 125 billion cubic feet decline in inventories, which is significantly higher than the five-year average. This significant decline in inventories is creating an atmosphere of speculation in the market and supporting the bullish trend.

In the future, the situation on the gas market may undergo even greater changes. Failure to extend the agreement on Russian gas transit to Europe via Ukraine could lead to further inventory reductions and, as a result, additional price increases. The combination of persistent cold weather and high export activity continues to support a positive outlook for natural gas prices at the end of December, indicating a high probability of further price increases.

It is recommended to set the target level for selling at $3.8. Partial closing of positions can be considered at the level of $3.5 to take profits in the face of a possible early change of trend to bearish. It is better to open positions in the range of $3.162 to $3.5.